Euromoney Annual Financial Report

Document

Location

Annual Report and Accounts 2015

Investor relations

- Reports & presentations

Notice of Annual General Meeting 2016

Investor relations

- Shareholder services/AGM information

Risk

Potential impact

Mitigation

Change

Downturn in economy or market sector

The group generates significant income from certain key geographical regions and market sectors.

Economic or political uncertainty in global financial markets increases the risk of a downturn or potential collapse in one or more areas of the business. If this occurs income is likely to be adversely affected and for events businesses some abandonment costs may also be incurred.

The group has a diverse product mix and operates in many geographical locations. This reduces dependency on any one sector or region. Management has the ability to cut costs quickly if required or to switch the group's focus to new or unaffected markets for instance, through development of new vertical markets or transferring events to better performing regions.

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Travel risk

The conference, seminar and training businesses account for approximately a third of the group's revenues and profits. The success of these events and courses relies heavily on the confidence in and ability of delegates and speakers to travel internationally.

Significant disruptions to or reductions in international travel for any reason could lead to events and courses being postponed or cancelled and could have a significant impact on the group's performance.

Past incidents such as transport strikes, extreme weather including hurricanes, terrorist attacks, fears over SARS and swine flu, and natural disasters such as the disruption to airline schedules from volcanic ash in Europe, have all had a negative impact on the group's results, although none materially.

Where possible, contingency plans are in place to minimise the disruption from travel restrictions. Events can be postponed or moved to another location, or increasingly can be attended remotely using online technologies.

Cancellation and abandonment insurance is in place for the group's largest events, including Ebola cover for Mining Indaba, the group's largest conference taking place in South Africa in February 2016.

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Risk

Potential impact

Mitigation

Change

Compliance with laws and regulations

Group businesses are subject to legislation and regulation in the jurisdictions in which they operate. The key laws and regulations that may have an impact on the group cover areas such as libel, bribery and corruption, competition, data protection, privacy (including e-privacy), health and safety and employment law.

More recently, new financial regulations being introduced as a result of the financial crisis of 2008 have implications for the group's price reporting, benchmark and indices businesses (see published content risk).

In September 2015 the group acquired 9.9% interest in Zanbato Inc, an international private capital placements platform and workflow tools provider. A new business has been created to bring together the technology of Zanbato and the market reach of Institutional Investor's Investor Intelligence Network (IIN) to serve the institutional segment of the private placements market. This has increased legal and regulatory compliance risk for the group.

A breach of legislation or regulations could have a significant impact on the group in terms of additional costs, management time and reputational damage.

In recent years, responsibilities for managing data protection have increased significantly. The emergence of new online technology is leading to further legislation and responsibilities for managing data privacy.

Proposed new regulation by the European Union to improve market transparency under which prices, benchmarks and indices are provided, could affect a number of businesses in the group.

Failure to comply with laws and regulations in any part of the world could result in significant financial penalties and reputational damage.

Compliance with laws and regulations is taken seriously throughout the group. A Code of Conduct (and supporting policies) sets out appropriate standards of business behaviour and highlights the key legal and regulatory issues affecting group businesses. Divisional and local management are responsible for compliance with applicable local laws and regulations, overseen by the executive committee and the board and supported by internal audit.

The company's speak-up policy sets out the duty for all employees to report improper activity or suspicions of improper activity. If employees feel they cannot raise a matter directly, it can be reported anonymously using an independent whistle-blowing hotline.

A compliance framework for price reporting, benchmark and indices businesses has been implemented, formalising standards of conduct, procedural guidance and staff training. Ethics audits have been conducted to support the framework.

The group has strict policies and controls in place for the management of data protection and privacy. These are supported by new computer-based training (CBT) rolled out worldwide in 2015. The group has website technology to reinforce online legal and regulatory compliance.

The group has compliance staff in place where relevant and appointed a senior compliance manager in its IIN/Zanbato business during the year.

A new online compliance handbook is being provided to all managers in all offices this year, to support governance and further mitigate compliance risk.

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Risk

Potential impact

Mitigation

Change

Data integrity, availability and cyber security

The group uses large quantities of data including customer, employee and commercial data in the ordinary course of its business. The group also publishes large quantities of data (see published content risk).

The integrity, availability and security of this data are key to the success of the group.

Information risk has increased as a result of the growing number of cyber-attacks affecting organisations globally, the group's greater dependency on technology and the increasing threats from cyber-crime.

Any challenge to the integrity or availability of information that the group relies upon could result in operational and regulatory challenges, costs to the group, reputational damage and the permanent loss of revenue. This risk has increased as the threat of cyber-attack has become more significant. A successful cyber-attack could cause considerable disruption to business operations.

The wider use of social media has also increased information risk as negative comments made about the group's products can now spread more easily and more quickly.

Although technological innovations in mobile working, the introduction of cloud-based technologies and the growing use of social media present opportunities for the group, they also introduce new information security risks that need to be managed carefully.

The group has comprehensive information security standards and policies in place which are reviewed on a regular basis. Access to key systems and data is restricted, monitored, and logged with auditable data trails. Restrictions are in place to prevent unauthorised data downloads. The group is subject to regular internal information security audits, supplemented by expert external resource. The group continues to invest in appropriate cyber defences including implementation of intrusion detection systems to mitigate the risk of unauthorised access.

The group's information security group meets regularly to consider and address cyber risks.

Comprehensive backup plans for IT infrastructure and business data are in place to protect the businesses from unnecessary disruption.

Information providers are facing increasingly sophisticated cyber-attacks. The controls to prevent an information security breach require constant review and assessment across the company. The company has an active information security programme in place to mitigate cyber risk effectively.

The group's professional indemnity insurance provides cover for cyber risks including cyber-attack and data breach incidents.

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Hazard risk affecting a significant office

The group's main offices are in London, New York, Montreal, Hong Kong and Sofia. A significant incident affecting these cities could lead to disruption to group operations.

An incident affecting one or more of the key offices could disrupt the ordinary operations of the businesses at these locations; a region-wide disaster affecting all offices could have worse implications with serious management and communication challenges for the group and a potential adverse effect on results.

The risk of office space becoming unusable for a prolonged period and a lack of suitable alternative accommodation in the affected area could also cause significant disruption to the business and interfere with delivery of products and services.

Incidents affecting key clients or staff in these regions could also give rise to the risk of not achieving forecast results.

Business continuity plans are in place for all businesses. These plans are refreshed annually and a programme is in place for testing them. If required, employees can work remotely.

The group has robust, high-availability IT systems with key locations (including the UK, US, Canada and Asia) benefiting from offsite data backups, failover technology and third-party 24-hour support contracts for key applications.

The group's business continuity planning helped its New York office to recover quickly and effectively from the significant disruption caused by Hurricane Sandy in 2012, and more recently maintain operations in its Bangkok office during the Thai political crisis last year.

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Risk

Potential impact

Mitigation

Change

Published content risk

The group generates a significant amount of its revenue from publishing information and data online or in its magazines and journals. As a result, there is an inherent risk of error which, in some instances, may give rise to claims for libel. The rapid development of social media has increased this risk.

The transition to online publishing means content is being distributed far quicker and more widely than ever before. This has introduced new challenges for securing and delivering content and effective management of content rights and royalties.

The business also publishes databases and data services with a particular focus on high-value proprietary data. There is the potential for errors in data collection, data processing and/or poor quality research. The group publishes industry pricing benchmarks for the metals markets and more than 1,000 equity and bond indices. The group also runs more than 100 reader polls and awards each year.

A successful libel claim could damage the group's reputation. The rise in use of social media, and in particular tweeting and blogging, has increased this risk. Damage to the reputation of the group arising from libel could lead to a loss of revenue, including income from advertising. In addition, there could be costs incurred in defending a claim.

The failure to manage content redistribution rights and royalty agreements could lead to overpayment of royalties, loss of intellectual property and additional liabilities for redistribution of content.

The integrity of the group's published data is critical to the success of the group's database, research and data services. The group also publishes extensive pricing information and indices for the global metals industries and financial markets. Errors in published data, price assessments or indices, or a perceived reduction in the quality of the group's research could affect the reputation of the group leading to fewer subscribers and lower revenues.

Any challenge to the integrity of polls and awards could damage the reputation of the product and by association the rest of the group, resulting in legal costs and a permanent loss of revenue.

The group runs mandatory annual libel courses for all journalists and editors. Controls are in place, including legal review, to approve content that may carry a libel risk. Editorial controls are also in place for social media and this activity is monitored carefully.

The group's policy is to own its content and manage redistribution rights tightly. Royalty and redistribution agreements are in place to mitigate risks arising from online publishing. Tight controls have been implemented for the verification, cleaning and processing of data used in its database, research and data services.

Processes and methodologies for assessing metals and other commodity prices and calculating indices are clearly defined and documented. All employees involved with publishing pricing information or indices receive relevant training. Robust contractual disclaimers are in place for all businesses that publish pricing data, benchmarks and indices.

Polls and awards are regularly audited and a firewall is in place between the commercial arm of the business and the editors.

Key staff are aware of the significant risks associated with publishing content and strong internal controls are in place for reporting to senior management if a potential issue arises. These are documented in a publishing risk handbook provided to all journalists. The group also has libel insurance and professional indemnity cover.

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Securing and retaining key staff

The group is reliant on key management and staff across all of its businesses. Many products are dependent on specialist and/or technical expertise.

The inability to recruit and retain talented people could affect the group's ability to maintain its performance and deliver growth.

When key staff leave or retire, there is a risk that knowledge or competitive advantage is lost.

Long-term incentive plans are in place for key staff to encourage retention. The directors remain committed to the recruitment and retention of high-quality management and talent, and provide a programme of career opportunity and progression for employees including extensive training and international transfer opportunities.

Succession planning is in place for senior management.

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Risk

Potential impact

Mitigation

Change

Failure of key technology

The company has invested significantly in back-office and publishing technologies to support the transition of the business from print to online publishing. The proprietary data businesses rely on specialised information systems to deliver high-value benchmark, index and price data to its clients. The company's event businesses are dependent on delegate registration technologies.

The company's back-office technology provides customer and product management, digital rights management, e-commerce and performance and activity reporting. The platform supports a large share of the group's online requirements including key activities for publishing, events and data businesses. Central content management technologies are used to publish most of the company's online content and data.

The company's research and data businesses rely on bespoke databases and algorithms to provide its clients with investment research, commodity pricing, macroeconomic analysis, benchmarks and indices.

The company runs at least 400 events annually, many taking place in emerging market countries. The successful running of the events depends on high-quality registration and networking technology.

The group's technology is critical to the successful functioning of all its businesses and hence carries a significant amount of risk.

The group considers that this risk has increased because the group's reliance on key technologies has increased.

A failure of the back-office technology may affect the performance, data integrity or availability of the group's products and services. Any extensive failure is likely to affect a large number of businesses and customers, and lead directly to a loss of revenues.

Online customers are accessing the group's digital content in an increasing number of ways, including using websites, apps and e-books. The group relies on effective digital rights management technology to provide flexible and secure access to its content. An inability to provide flexible access rights to the group's content could lead to products being less competitive or allow unauthorised access to content, reducing subscription revenues as a result.

The company has many online businesses that rely on central content management technology to meet its publishing deadlines and commitments. Any interruption to publishing and updating content risks serious reputational damage to products and declining revenue.

Approximately a third of the group's revenues derive from its research and data products. Technology failures affecting the quality and delivery of these products could put this revenue at risk.

A failure of the company's event systems could cause significant disruption to the running of any of its events leading to loss of revenue.

The group's reliance on key suppliers, particularly IT suppliers, has increased. An operational or financial failure of a key supplier could affect the group's ability to deliver products, services or events which could have a direct impact on management time and financial results.

A failure of any one of its key technologies or a poor strategic investment in an inappropriate technology could have a significant impact on the company's reputation and results.

The group continues to invest significantly in its central back-office, publishing and research and data technologies. The platforms are planned, managed and run by dedicated, skilled teams with progress and performance closely monitored by the executive committee and the board.

The group has digital rights management technology to ensure its content is adequately secured and changing customer requirements for accessing the group's products and services are met.

Operational and financial due diligence is undertaken for all key suppliers as part of a formal risk assessment process. Contingency planning is carried out to mitigate risk from supplier failure.

The group has made a substantial investment in e-commerce technology and hosting infrastructure to ensure the back-office platform continues to perform effectively.

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Risk

Potential impact

Mitigation

Change

Acquisition and disposal risk

As well as launching and building new businesses, the group continues to make strategic acquisitions where opportunities exist. The management team reviews a number of potential acquisitions each year with only a small proportion of these going through to the due diligence stage and possible subsequent purchase. The group also disposes of businesses that no longer fit the group's strategy.

The group has impaired a number of its investments during the year due to challenging market conditions, and therefore considers this acquisition and disposal risk as increasing.

There is a risk that an acquisition opportunity could be missed. The group could also suffer an impairment loss if an acquired business does not generate the expected returns or fails to grow. Additionally, there is a risk that a newly acquired business is not integrated into the group successfully or that the expected risks of a newly acquired entity are misunderstood. As a consequence a significant amount of management time could be diverted from other operational matters.

The group is also subject to disposal risk, possibly failing to achieve optimal value from disposed businesses, failing to identify the time at which businesses should be sold or underestimating the impact on the remaining group from such a disposal.

Senior management perform detailed in-house due diligence on all prospective acquisitions and call on expert external advisors where necessary. Acquisition agreements are usually structured to retain key employees in the acquired company and there is close monitoring of performance at board level post-acquisition.

The board regularly reviews the group's existing portfolio of businesses to identify under-performing businesses or businesses that no longer fit with the group's strategy and puts in place divestment plans accordingly.

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Failure of product strategy

The growth of tablets and other mobile devices and the proliferation of social media are changing how customers access and use the group's products and services.

The group has established a strategy to meet the many challenges of migrating the publishing businesses from traditional print media to online and to ensure the non-publishing businesses take advantage of new technology when advantageous to do so.

This strategy has been pursued for a number of years.

The group considers that this risk has increased because of the increased reliance on technology for new product development.

The group's online strategy addresses a number of challenges arising from the group's transition from print media to an online business and changing customer behaviour.

Competition has increased, with free content becoming more available on the Internet and new competitors benefiting from lower barriers to entry. A failure to manage pricing effectively or successfully differentiate the group's products and services could negatively affect business results.

The customer environment is changing fast with an increasing number spending more time using the Internet. Print circulation is declining and a failure to convert customers from print risks a permanent loss of customers.

Further changes in technology including the widespread use of tablets and other mobile devices and social media are changing customer behaviour and introducing new challenges.

A failure in the group's online strategy to meet these challenges could result in a permanent loss of revenue.

The group is embracing these challenges and overall sees the Internet and other technological advances as an opportunity, not a threat.

Significant investment in the group's online strategy has already been made and will continue for as long as necessary. New content management technology is being implemented across the group to enable more effective publishing to web, print and the rapidly increasing number of mobile platforms coming onto the market. Many of the group's businesses already produce soft copies of publications to supplement the hard copies as well as provide information and content via apps.

The group's acquisition strategy has increased the number of its online information businesses. However, while online revenues are important, the group's product mix reduces dependency on online income. For example, the group generates a third of its profits from its event businesses and face-to-face meetings remain an important part of customers' marketing activities.

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Risk

Potential impact

Mitigation

Change

Treasury operations

The group treasury function is responsible for executing treasury policy which seeks to manage the group's funding, liquidity and treasury derivatives risks. These include currency exchange rate fluctuations, interest rate risks, counterparty risk and liquidity and debt levels. These risks are described in more detail in note 18 to the group financial statements.

If the treasury policy does not adequately mitigate the group's financial risks or is not correctly executed, it could result in unforeseen derivative losses or higher than expected finance costs.

The treasury function undertakes high-value transactions hence there is an inherent risk of payment fraud or error having an adverse impact on group results.

The tax and treasury committee is responsible for reviewing and approving group treasury policies which are executed by the group treasury.

Segregation of duties and authorisation limits are in place for all payments made. The treasury function is also subject to regular internal audit.

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Unforeseen tax liabilities

The group operates within many tax jurisdictions and earnings are therefore subject to taxation at differing rates across these jurisdictions.

The directors endeavour to manage the tax affairs of the group in an efficient manner; however, due to an ever-more complex international tax environment there will always be a level of uncertainty when provisioning for tax liabilities. There is also a risk of tax laws being amended by authorities in the different jurisdictions in which the group operates which could have an adverse effect on the financial results.

External tax experts and in-house tax specialists, reporting to the tax and treasury committee, work together to review all tax arrangements within the group and keep abreast of changes in global tax legislation.

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